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| Wednesday, 17 March 2004 |
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by Anura Maitipe Public funds amounting to a staggering Rs. 990 million has been squandered through several wasteful deals and projects initiated by the Board of Investment (BoI), the Auditor General's report for 2002 reveals. According to the report, the BOI has spent a huge sum of public funds for renting out buildings, abandoned projects, recruitment of advisers and for advertisements. These deals resulted in a huge loss to the Treasury. Relocation of the offices of the Board at the WTC building resulted in a additional expenditure on rent, electricity, maintenance etc. and had adversely affected the financial results and liquidity position of the Board. Further the Board had rented out the building close to the WTC to a Government Ministry with an annual rent of Rs. 8,189,280. The Board had agreed to supply 400 cubic metres of treated water to a company daily in the Horana Export Processing Zone, and it had supplied the required quantity through a contractor and from three tube wells belonging to the BOI with a daily capacity of 300 cubic metres. In this process Board had incurred a loss of Rs. 3.3 million being the excess payment made for more than the amount invoiced to the company during the year under review. A sewerage treatment plant valued at Rs. 52 million initially supplied and arranged to be established at Wathupitiwela Export Processing Zone had been shifted to Horana Export Processing Zone with an additional cost of Rs. 2,661 million. The civil construction works at Wathupitiwela E.P.Z. valued at Rs. 7.33 million has therefore been idle, as at the date of the audit inspection. According to the Chairman of Board a common sewage treatment plant which was planned for Horana EPZ (for which tenders were also received) had not been implanted due to financial constrains. A sum or Rs. 20,825,397 had been expended on solid waste landfill project at Madapatha and it was abandoned. Later the Board had decided to allocate another sum of Rs. 6.339 million for two new water processing facilities for the unutilized funds allocated for the initial project. According to the Chairman of the Board phase one of the project was fully completed and phase two was abandoned due to public protest. Delays in projects The Board had awarded a contract through RDA to SD & CC in respect of construction of a bridge across Dandugamoya at Katuanayaka with an estimated cost of Rs. 80 million and made an advance payment of Rs. 20 million in 2000. Construction work of the project had been terminated by the SD & CC and had made an additional claim or Rs. 4,964,962. At present a substantial number of people are crossing the existing temporary access on floating barrels. According to the Chairman of the Board the RDA had been requested to temporarily suspend the construction work in January 2002 due to the limited capital grants made available to the BOI by the Treasury. The Board had spent Rs. 1,731,282 to carry an advertisement in the Global edition of the Financial Times newspaper calling for expression of interest for the establishment of power plants of 3X350 MW capacity. 162 applications had been received in 2001 of which only 5 were from foreign investors. According to the Chairman of the Board a Cabinet Appointed Negotiating Committee had decided to discontinue this project. BOI had expended Rs. 13,127,347 to set up a Global Logistic Hub in Sri Lanka. Though the Foreign consultant had submitted his final report with recommendations on 29. 09. 2000 the Board had not taken action to find an investor to develop this project as at the date of this report. Though the Board had spent a sum of Rs. 5,634,355 in 2000 to develop an Information Technology Park at Pugoda Textile Mill which was under liquidation, no construction had been started as at the date of this report. In addition to the initial cost incurred in 2000, Rs. 7,761,516 had been spent during the last two years to maintain the site on security, electricity and salaries. Extraneous Items The Board had appointed a consultant on contract basis with a monthly salary of US$ 5,000 for four months from 15th May 2002 to conduct an audit of employment practices in the EPZs. The applications for consultancy had not been called for and the contract period had been extended for further three months from December 2002. The Board had made an Ex-Gratia payment of Rs. 106,300 to a local consultant for the work he has performed in a foreign country while he was on a personal visit after termination of the service contract and also Rs. 622,768 had been paid to him as allowances during his stay abroad. It was further observed that the Cabinet of Ministers had rejected the extension of service of the consultant referred above. The Board had paid a sum of Rs. 13,452,983 to produce and eight minutes promotional corporate video by a foreign media firm neither following the accepted tender procedure nor approval for the deviation form the tender procedure. Further possibility of getting this work done by a local media firm with the help of the BOI's own media unit had not been explored. According to the Chairman of the Board there was insufficient time to go through a tender procedure to appoint a media company, and obtaining foreign talent in videography was a huge benefit to the BOI. Board had purchased 251 acres of land from Sri Lanka Telecom out of 271 acres valued at Rs. 385 million by the Chief valuer, and full amount had been paid without a proportionate reduction amounting to Rs. 28.4 million. Board had neither taken any action to recover the over payment nor accounted for as receivable. 26,696 square metres of Lands leased to six companies which had been closed down at various zones had been mortgaged to private banks to get facilities by the respective companies. These lands had later been acquired by respective Banks and the Board is not in a position to have the ownership on these lands and unable to allocate to new investors. As an integral part of the global investment promotion strategy to accelerate and attract foreign direct investments into the country, the Board and spent Rs. 7,280,922 on the Asian Athletics Championship and ICC Champions Trophy held during August and September 2002 in Sri Lanka. The Board had spent Rs. 27,407,700 to setup an Information Technology Centre at former Gam Udawa site at Kamburupitiya which is outside the objectives of the Board. The Centre had been given to the Institute of Information Technology of Sri Lanka to run the project without any formal agreement. Special Incentive Program The Board had released a sum of Rs. 429,675,844 as interest free loan to 27 investors to build their factories and out of which Rs. 394,814,134 had been outstanding as at 31 December 2002. Following observations are made in this regard. I. In certain instances, loan instalments had not been settled by the respective companies in accordance with the relevant loan agreements. II. In respect of seven loans aggregating Rs. 66,156,896, even a single instalment had not been paid as at the end of the year under review. III. sufficient provisions had not been made in the accounts for bad and doubtful debts. The Board had expended over - Rs. 331 million for
the payment of rent and interior partitioning at the
WTC building as follows.
Amount
Rs.
Rent - BOI and BII 284,764,708
Deposits and advnaces 26,429,543
Expenditure for partitioning 20,055,548
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Total 331,249,799
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